Bush Tax Plan Sent to Congress, Starting the Jostling for Position

By DAVID E. SANGER

Published: February 9, 2001

WASHINGTON, Feb. 8 — President Bush formally sent Congress his proposal today for the broadest and deepest tax cuts in two decades, touching off a debate that seemed sure to produce a major cut in personal income taxes this year.

But no sooner had Mr. Bush described his plan in the Rose Garden, declaring it a boon for the working poor, than Democrats began jockeying to limit its size while conservatives and business groups sought to expand it. The White House said it would try to head off corporate lobbyists — many representing major contributors to the Bush campaign — who seek to garnish it with huge cuts for their wealthy clients.

Vice President Dick Cheney, in one of a series of interviews intended to sell the program, warned this afternoon against the temptation to expand the $1.6 trillion plan.

"We're going to try to discourage that," Mr. Cheney said on WSMV-TV of Nashville. "President Bush met with business groups just yesterday and urged them not to fall into the trap of trying to get every pet provision added to the bill."

The elements of the plan Mr. Bush described today contained no surprises: a reduction of tax rates and a simpler structure of tax brackets; a doubling of the child tax credit to $1,000 a child; a cut of the marriage penalty that affects two-earner couples; and elimination of the estate tax — which Mr. Bush and other Republicans call the "death tax."

Before an audience of Hispanic business owners, Mr. Bush argued that the first beneficiaries would be middle-class families, who would see the deepest percentage cuts in the taxes they pay. But their savings would be relatively small compared with those for the wealthy, whose smaller percentage cuts would reflect far larger dollar amounts.

The president also urged Congress to make the cut retroactive to Jan. 1, a move he said would help lift the nation out of an economic slowdown.

Under current law, the five tax brackets range from one of 15 percent for households with taxable annual income of not more than $27,050 for single taxpayers — and $45,200 for married taxpayers filing jointly — to one of 39.6 percent for taxable income of more than $297,350.

Under the plan, the lowest bracket would be 10 percent, for single taxpayers earning up to $6,000 a year or married taxpayers earning up to $12,000. (Those taxpayers rarely, in fact, have any income tax liability.) The highest rate would be 33 percent, for single taxpayers earning more than $136,750 and married taxpayers with income of more than $166,500.

The Bush plan would, over eight years, end the estate tax, which now applies only to estates of more than $675,000 for individuals, and roughly double that for married couples.

By the time Treasury Secretary Paul H. O'Neill formally delivered the proposal on Capitol Hill, the clamor to alter it radically was already in full cry.

Democrats called the savings for the poorest households illusory: While Mr. Bush boasts that his plan would drop the taxes of a poor family of four to zero, families of four making up to roughly $25,000 now pay little or no income tax. And the plan does nothing to cut the $3,800 such a family would pay annually in Social Security and Medicare payroll taxes.

Isaac Shapiro, a senior fellow at the Center on Budget and Policy Priorities, a liberal-leaning group, estimates that "12 million families, both the poor and those just above the poverty line, are left out entirely" of the Bush plan.

This afternoon, Lawrence B. Lindsey, the White House's economic adviser, declined to say why the administration would provide no relief to the working poor, who pay only payroll taxes.

"I want to focus on the structure of the tax cut the president sent up today," he said, adding later that under Mr. Bush's Social Security reform proposals, the poorest workers, like the richest, would have "more control over that money for investment purposes."

Such statistics led the Democratic leaders of the House and Senate, Richard A. Gephardt and Tom Daschle, to summon reporters for a display of their own automotive metaphor for the tax plan.

As they appeared with a black Lexus sedan and battered replacement muffler, Mr. Daschle argued that the car was "just like the Bush tax cut — fully loaded. If you're a millionaire, under the Bush tax cut, you get a $46,000 tax cut, more than enough to pay for this Lexus. But if you're a typical working person, you get $227, and that's enough to buy this muffler."

Republicans welcomed Mr. Bush's plan, with Dick Armey, the House majority leader, saying, "This is one of the most exciting days of my congressional career."

But the race was on to make the cut even bigger than the $1.6 trillion, over 10 years, that President Bush has insisted is "the right figure."

Hundreds of lobbyists have swarmed across Capitol Hill in recent days complaining that there is nothing in the tax cut for businesses — beyond making the research and development tax credit permanent, and eliminating, over eight years, the estate tax.

Mr. O'Neill, the former chairman of Alcoa, has said he believes that the corporate income tax should be eliminated — just not this year.